What are hedge bets and are they a good idea?

Hedge bets generally don’t apply to the pokies (although some more sophisticated and complex online pokies do include an approximation of hedge bets), but as variety is the spice of life, you may want to venture out a little for a change of online gaming scenery and play something different. Hedge bets can come up in all sorts of gambling, but craps and blackjack are two common ones.

First of all, what is a hedge bet? Well, many of you will have heard of the phrase” to hedge your bets”. Let’s examine what the phrase means. To “hedge your bets” means “to avoid committing oneself, to leave a means of retreat open and available”. The verb “to hedge” has been around for centuries meaning “to avoid commitment, to equivocate” and it came to be associated with financial transactions. Loans were secured by including them in larger loans from the early 1600s onwards, and this came to be known as “hedging ones debts”. Later on in that same century, the term “hedging ones bets” was coined, referring to the practice of laying off a bet by taking out smaller “counter bets” with other lenders. This served the purpose of avoiding the possible situation of being unable to pay out on the original large bet.

Nowadays it means much the same thing. A hedge bet is a bet that you make on the side of your main bet with the aim of avoiding a major loss. If you lose the main bet, the hedger’s reasoning goes, at least you will win the hedge bet and thus avoid taking a major loss, or even manage to make a win either way. Sound like a good idea? It is almost always a bad one. Here is an extreme but pretty typical example to illustrate.

Just say, next year Joe bet $10 for Richmond to win the AFL Grand Final before the season had started. Now, Richmond, having performed very poorly for a number of years running, is a very long shot to win the final, and Joe was given 250 to 1 odds. But as September 2011 approach, Richmond had been looking better and better all season and has made it to the Grand Final to play Geelong. Richmond is now 7 point favourites to win the game. Statistically 7 point favourites win the game outright 70% of the time, so Joe is looking to make a packet - $2500 in fact. But Joe starts thinking, hmm, what if the Cats beat the Tigers? What if Richmond loses and I lose my ten bucks? So what does Joe do? He places another bet – this time he bets $500 on the Geelong Cats to win, getting 2 to 1 odds. Okay, so that way, if the Richmond Tigers win, he gets $2500, but if the Geelong Cats win, he still gets $1000. Good plan right? Well, Richmond wins the Grand Final and Joe collects his $2500 – good for him. Except that he really on netted $2000 after laying out his $500 hedge bet on Geelong.

Gamblers try this sort of thing all the time – there’s a constant search for a “sure thing” – ways to be so that you always win. It may seem like a good idea, but hedge bets are nearly always a bad move. Hedging your bets may seem like it’s saving you on losses but really it is just eating into your profits. Think of it like this – you should only be making good percentage bets. If you have to bets countering each other, each going against the other, then one of them is almost always going to be a bad percentage bet that you shouldn’t take. If your initial bet was good, and it likely to make you money, then your hedge bet is bad and you should not make it. If you bet on the Tigers to win, the only thing that should make you then bet on Geelong is if Geelong is a better bet. Giving a bad percentage bet the name of “hedge bet” does not make it a good bet.

There is but one exception. If you are betting big money – and we are talking life changing amounts of money you are laying out on a bet. Firstly, give some serious consideration to whether you actually want to be doing that, and if maybe instead you shouldn’t be contacting a gambling helpline. But maybe you are good, together, not problems, you just want to make the bet of a life changing sum. Using a hedge bet to insure some of that money for you is worth considering and probably worth doing. As far as exceptions go, that is pretty much it for the hedge bets. If it’s life altering-ly huge sums, hedge your bets. If not, go for the good bet and leave the others alone.